Property market still pegged to Chinese investment

China may have had its purchase of Ausgrid denied, but Chinese investors remain persistent players in the Australian property market.

While obstacles to foreign investment in Australia may have increased, Chinese interest in Australia’s property market persists, according to Basis Point general manager CT Johnson.

“A Chinese investor’s pain point is much higher than what’s generally perceived in Australia because the Chinese have a far greater need for security and far fewer ways of achieving it,” Mr Johnson said.

“The risk of a small decline in property prices (assuming they’re not offset by currency movements) or adding another 4 per cent to a foreign buyer’s stamp duty simply isn’t material to someone wanting to get a big chunk of their wealth out of China.”

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Chief among these obstacles to foreign investment was the move by Australian banks to restrict lending to offshore buyers. According to Mr Johnson however, this supply has been met by other parties.

“[We] found that a large number of local and offshore lenders are stepping into the breach left open by the exit of Australian banks,” he said.

A strong housing supply stream may be the key to reducing Sydney’s staggering housing prices.

“Chinese and Australian developers backed by Chinese capital are creating more housing supply that will eventually lead to lower rents. To incentivise developers to take the risk of building homes, they need buyers, which is where the Chinese offshore investors have come into the picture in the past three years,” Mr Johnson said.

According to Basis Point founder David Chin, strong Chinese interest in Australia will continue despite the bank restrictions.

“Despite the shaky public sentiment at present, the outlook is still ‘all good’ for most in the Australia-China relationship,” he said.

Mr Chin added that the issue of foreign investment will continue to be a point of contention in the Australian property market.

“It’s a balancing act between keeping the 60 per cent of Australians who own their own home, or are paying it off, reassured that their biggest asset is safe versus affordability issues for the next generation of home owners and the 40 per cent who rent or are in share houses.”